EU commission overhauls pricing rules for sugar growers

By Associated Press | June 23, 2005

BRUSSELS -- The European Union's head office disclosed sweeping changes yesterday to its 40-year-old system for protecting sugar growers, despite criticism from producers and exporters from some of the world's poorest nations.

The European Commission proposal will cut guaranteed prices to European producers by 39 percent, following a successful challenge to the subsidy system at the World Trade Organization by Australia, Brazil, and Thailand. The cuts face resistance from European producers and poor nations in Africa and the Caribbean that have had preferential access to EU markets.

''There is no alternative to a profound reform," said EU Agriculture Commissioner Mariann Fischer Boel. ''EU sugar producers have a competitive future, but only if we act now and act decisively to prepare them for the challenges ahead."

The WTO ruled in April that the EU's system of subsidies to guarantee high prices for European sugar producers was illegal. It agreed with Brazil, the world's biggest producer, which argued that the EU system depressed world prices and made it impossible for others to compete.

EU sugar prices are more than four times higher than the global market rate and are protected by massive import tariffs.

Brussels also pays export subsidies to get millions of tons of sugar a year off its market, helping to keep EU prices high and support Europe's farmers.

The EU system also grants preferential treatment to sugar producers in poor nations in Africa and the Caribbean who fear their industries could be devastated by changes that would slash guaranteed prices and open them up to competition from major world producers.

''Today's proposals will hurt many farmers in poor countries," said Luis Morago, spokesman for the aid group Oxfam. ''The steep, sharp price cut will be very damaging for poor African countries, and the overall reform package doesn't guarantee an end to EU overproduction and dumping."

Poor nations are urging the EU to phase in prices cuts over 10 years to allow their producers to adapt to the market changes.